New York (Reuters): Gold fell on Friday after China raised bank reserve requirements and investors took profits in bullion U.S. data showing rising consumer confidence and a shrinking trade gap.
For the week, bullion fell more than 2 percent, its biggest weekly decline in nearly two months, as rising yields for U.S. Treasuries prompted some investors to take profits in precious metals and allocate some funds to government debt.
Suki Cooper, precious metals analyst at Barclays Capital, said profit-taking pressured gold but economic uncertainty kept longer-term investment demand stable across precious metals.
“Gold has still found healthy physical demand upon price dips even after the seasonally strong period for demand, but perhaps more importantly, we haven’t seen a surge in scrap supply,” Cooper said.
HSBC and other bullion banks also said steep declines in prices triggered more gold buying in emerging markets. They pointed to high premiums in India and China as evidence of strong physical demand.
Spot gold slipped 0.1 percent to $1,385.92 an ounce at 2:10 p.m. EST (1910 GMT), sharply below a record high at $1,430.95 set on Tuesday. U.S. February gold futures settled down $7.90 at $1,384.90.
Spot silver dropped 0.2 percent to $28.65 an ounce, retreating after a rally to $30.68 on Tuesday.
COMEX gold and silver futures volume were both more than 40 percent below their 30-day averages, preliminary Reuters data showed, as some trading desks and funds already have closed their books ahead of the year end.
BNP Paribas analyst Anne-Laure Tremblay said year-end book squaring was also aiding downside pressure in gold. “Investors who have performed well this year may be looking to protect their gains rather at this stage,” she said.
Earlier, China’s central bank said it was raising lenders’ required reserves by 50 basis points, effective December 20, its sixth official increase this year.